Do you have open positions right now?

If so, what’s the most you can lose on each one? What about total?

If you don’t know, you need to learn about defined risk. Defined risk is a critical element of risk management. Defined risk means that for every single trade you know exactly the maximum you can lose on it.

For stock and futures trades, using stop loss orders are a must. Never let a winner turn into a loser and never let a loser turn into a monster loser.

For options trading, it is even easier. Using advanced option spreads, we can know to the dollar the maximum loss every trade could take. We often also know the max gain an option trade will achieve.

By comparing the two, we can evaluate our risk/reward ratio. This is all part of our trade management strategy.

All of our Day Trading, Swing Trading and Option Trading systems use defined risk to manage potential losses. View all our membership options.

Open a thinkorswim by TDA account today!